Forward looking statements
This presentation contains certain forward-looking statements. Actual results may differ materially from those projected or implied in
such forward-looking statements. Such forward-looking information involves risks and uncertainties that could affect expected results.
27th February 2020
FBD Holdings plc 2019 Full Year Results
2019 FULL YEAR RESULTS
1
Overview
Fiona Muldoon, CEO
2
Capital
Net Asset Value 1,068c
Return on Equity (ROE) of 30%
Strong solvency position of 192% (unaudited)
72.3% Combined Operating Ratio
Current year COR of 84% with exceptionally little weather
(2018: 90%)
Good claims settlement activity results in €40m prior year
reserve releases (2018: €29m)
Full year profit of €112m before tax
Unusually strong year
Maintaining underwriting discipline
Customer central to sales and claims service
Improved products and pricing
Business Developments
Improved Farm multi-peril product – increased Public Liability
cover and new Environmental Liability cover as standard. First in
Ireland
New Small Business product: good ongoing success with shops,
pubs and restaurants
First to market with end to end digital customer journey for
motor customers
Partnership with An Post is performing well
New partnerships such as Taxi-fair added
GWP of €370m (2018: €372m)
Strong competition in all customer segments with price
pressure and increased use of discounts
Satisfactory retention of existing customers
New business levels up 13%
Dividend
Proposed 2019 dividend of 100 cent per share (2018: 50 cent)
35% Pay-out Ratio (2018: 40%)
Key Highlights
3
An exceptionally quiet year for weather compares to 5 year average of approx. €10m (net of reinsurance)
Excellent pricing and underwriting discipline with current year COR of 84% (2018: 90%)
Strong Investment income of €18m (compared to €2m in 2018)
Favourable Prior Year Claims Development €40m compared to €28m in 2018
Key components of 2019 result
*Source: Behaviour & Attitudes Quantitative Brand Tracking Year End ’17. FBD’s ‘Top of Mind’ awareness score has gone from 8% in ’16 to 11% in ’17
4
Improved our market leading farm
product
New Business Product – good shop, pub
and restaurant growth
Enhanced digital offering for on-line motor
customers
Products Customers
2.2% reduction in the average premium
paid by our customers (across the book)
Growth in An Post Channel bringing in
new motor customers
Sponsoring more than 100 community
events
Developing our digital channels to streamline
more customer journeys including claims
FBD offers customers real choice in how
they shop (34 branches; online; phone; broker or
through our partners)
Exploring opportunities to grow including
expanding our partnership approach
Leverage sponsorship of Olympic „Team
Ireland’ in the run up to Tokyo 2020
Strong focus on Farm and Brand
opportunities and rewards
Markets
Growing our business in a highly competitive market
5
2019 FULL YEAR RESULTS
Financial
Performance
John O‟Grady, CFO
6
2019 2018
GWP €370m €372m
Profit before tax €112m €50m
EPS 281c 122c
NAV 1,068c 818c
ROE 30% 15%
2019 2018
Loss ratio 46.4% 56.3%
Expense ratio 25.9% 24.9%
Combined Operating Ratio 72.3% 81.2%
Total investment return 2.7% (0.5%)
Income statement 1.7% 0.2%
OCI 1.0% (0.7%)
1,068c NAV
84.1% Current
Year COR
2019 Full Year Results
2019 Full Year Results
7
€370m Gross Written
Premium
€112m Profit Before
Tax
2019 €’000s
2018 €’000s
Gross written premium 370,063 371,504
Net earned premium 337,553 337,903
Net claims incurred (incl. MIBI) (156,625) (190,431)
Other underwriting expenses (87,259) (84,054)
Underwriting Result 93,669 63,418
Investment income 17,892 2,482
Finance costs (2,579) (5,453)
Other 3,498 1,454
Sub total 112,480 61,901
Loss on purchase and cancellation of convertible debt - (11,836)
Profit before tax 112,480 50,065
Analysis of Combined Operating Ratio
8
3.5% YOY current year
COR Improvement
€40m Prior year reserve
development
2019
2018
€m % €m %
Current Year Combined Operating Ratio
(Excluding Cat weather) 53.6 84.1% 41.3 87.7%
Storm Emma - - (6.6) 2.0%
Current Year Combined Operating Ratio
(Including Cat weather) 53.6 84.1% 34.7 89.7%
Prior year reserve release 40.1 (11.8%) 26.9 (8.0%)
MIBI levy release and related obligations - - 1.8 (0.5%)
Combined Operating Ratio as reported 93.7 72.3% 63.4 81.2%
Claims Reserve Development (Net Loss Ratios)
9
As at YE 2015 As at YE 2016 As at YE 2018 As at YE 2017 As at YE 2019
2019 prior year reserve releases of €40m mainly from accident years 2016 & 2017 although some across other accident years
(including €4m from 2014 & Prior)
Significant savings on the settlement of some large claims
o Accident years 2017 and 2018 display lower large claims development than historical observation
o 2016 accident year continues to be more profitable than previously expected
o Claims inflation has stabilised
AY 2015 AY 2016 AY 2017 AY 2018 AY 2019
Improved Investment returns in an on-going low interest rate environment
10
OCI return: 1.0%
New risk asset classes during the year
• Emerging Market Equity, Senior Private Debt, and
Infrastructure
• Strong equity performance
• Emerging Market Debt fund doing well
• Bond and Government portfolios low risk but challenged
by prevailing interest rate conditions
Income Statement return: 1.7%
Strong Mark-to-Market return on FBD‟s sovereign and
corporate bond portfolios, as a result of
• Falling interest rates &
• Ongoing Eurozone monetary policy
31-Dec-19
31-Dec-18
Group Investment assets €m % €m %
Deposits and cash 168 15% 157 15%
Corporate bonds 509 46% 498 47%
Government bonds 302 27% 297 28%
Equities & other risk assets 111 10% 79 8%
Investment property 19 2% 18 2%
Total 1,109 100% 1,049 100%
Investment Allocation
11
€22m increase in risk assets continues our progression of Strategic Asset Allocation and is in-
line with our strong solvency position
Total return on portfolio of 2.7% reflects recovery in markets in 2019 after disappointing
2018 (2018: -0.5%)
Liabilities well
matched by
fixed income
assets
Corporate Bond
portfolio with an
average credit
rating of A-
Further
increase in
Risk Assets
12
2019 FULL YEAR RESULTS
12
Environment
& summary
Fiona Muldoon, CEO
2015 2016 2017 2018 2019
Average Cost of Capped Litigated Injury Claims
2%
5%
Average cost of all Injury settlements up 2% in 2019. Average
Property claims costs up 10%, inflation still evident in litigated claims
Stabilisation in claims costs after several years of inflation
Special damages and legal costs remain high
We continue to contest suspected fraudulent cases and control the
areas we can – continue to work on strengthening our technological,
data analytics and fraud detection capabilities
We continue to advocate for reform. Some good outcomes in the
Court of Appeal that influence behaviour in the lower courts. Some
sensible outcomes on negligence versus personal responsibility.
6%
6%
Injury claims inflation appears to have stabilised 2%
10%
1%
13
2015 2016 2017 2018 2019
Average Cost of all Capped Injury Claims and Settlements
11%
14
Slow progress in the claims environment – systemic reform still required to deliver cheaper insurance for all consumers
Courts more willing to recognise that plaintiffs have some responsibility for their own personal safety
Supported by recent legislation to address the non-co-operation of claimants and reduce the
allowable timeframe to notify the claim
Legislation passed to establish the Judicial Council and the Personal Injuries Guidelines Committee
Irish compensation levels remain too high for soft-tissue injuries (> 4 times UK‟s awards)
Negligence standards remain unreasonably high
Court of Appeal judgements not fully filtered down to Circuit and District Courts
Reductions in the level of awards for soft tissue injuries needed
Fast-tracking of rejected Injuries Board claims with a simplified process
Make gross exaggeration an offence to disincentivise “have-a-go” claimants
Establish and resource a Garda fraud investigation unit to fully enforce existing laws
Progress
Systemic reform still required
FBD
recommendations
15
Dividend Recommendation
Our Dividend Policy is based on a pay-out ratio. We target 20-50%
of full year profits
Strong profits in 2019
Robust capital position
Solvency Capital Coverage of 192% (unaudited) under standard
formula, after allowing for proposed dividend
Proposed dividend of 100 cent per share; pay-out ratio of 35%
16
Excellent Profit of €112m before tax
Exceptional ROE of 30%
Summary
84% Current year Combined Operating Ratio is a
strong indication of on-going underwriting discipline,
quality risk selection and no weather
Proposed dividend of 100 cent per share
We aim to be the Irish insurer of choice.
Our customers and communities are at the
heart of who we are and what we do
17
Our strategy delivers for shareholders
Maintain underwriting discipline, continue to improve risk
selection and develop opportunities to safely grow our footprint
Our strategy for 2020 is to continue growing our capabilities in Commercial
and Consumer coupled with relentless focus on our premier position in Farm
Deliver customer centred products and service
2019 is an excellent underwriting result for FBD
18
Premium growth to come from new customer numbers while
maintaining underwriting discipline: easier said than done!
FBD does not guide on individual Income Statement
line items
2020 Guidance
Continuing low interest rate environment challenges
investment returns
Current Year Combined Operating Ratio in low 90‟s for 2020
is achievable (absent exceptional weather)
19
2019 FULL RESULTS
19
Appendix
Irish Environment
20
GDP growth is set to moderate amid a
weakening external environment, while
underlying economic activity is expected to
remain robust, driven by household
consumption and investment in construction
(European Commission statement – Nov 2019)
1.3%
3.2%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
Domestic demand 2021 forecasts
Yoy
gro
wth
Source: AMECO, Goodbody Estimates | *Core DD
Employment to rise by 1.7%: Jobs growth is
expected to remain robust in 2020 with 40,000
net job for Ireland projected, a slight
reduction on the 56,000 in 2019.
(Accountancy Ireland Predictions – Jan 2020)
Teagasc estimates average farm income in
Ireland increased by an estimated 7% in
2019 but this comes off the back of a decrease
of 21% in 2018. There are severe income
variations across different farm enterprises
with beef, sheep and tillage under significant
income pressure.
(Teagasc Outlook 2020)
Business Update
21
Change in GWP (Direct & Indirect)
Premium by Product
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Policy Volume Average Rate Cover and Mix Total GWP
YOY Movement
14% 15% 16% 14% 14%
23% 24% 25% 25% 26%
19% 17% 17% 17% 19%
8% 8% 9% 10% 10%
24% 25% 24% 24% 22%
11% 11% 10% 10% 9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2015 2016 2017 2018 2019
2016 v 2015 2017 v 2016 2018 v 2017 2019 v 2018 Commercial Motor Consumer Motor Small Business Motor Agri Farm Home
22
Agri
54%
Consumer
16%
Commercial
30%
CONSUMER
Strong conversion rates
Post insurance gaining momentum
Future opportunities
COMMERCIAL
Increased year on year
Strong retention
New product launched in 2019
AGRI
Best in class product
Market leader
Strong new business
Customer Segments
5 Year Prior Year Development on Best Estimate Reserves
23
(Strengthening) / Release
Financial Year € ‘m
2019 40
2018 29
2017 15
2016 4
2015 (69)
FBD Share Price Performance
24
60.00
70.00
80.00
90.00
100.00
110.00
120.00
130.00
140.00
12
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9
FBD Share Price ISEQ Index
Acquisition
The total of net commission and operating expenses incurred in the generation of
net earned premium and often expressed as a percentage of net earned premium.
The operating expenses are after the transfer of direct costs for claims settlement
expenses which are included in net incurred claims expense.
Best
Estimate
The actuary's expectation of future cost to settle all outstanding claims net of any
margin for uncertainty, representing a 50% probability that the reserves are adequate
to settle all future claims.
Casualty
Insurance
Insurance that is primarily concerned with the losses resulting
from injuries to third persons or their property (i.e. not the policyholder)
and the resulting legal liability imposed on the insured. It includes, but is
not limited to, general liability, employers‟ liability, workers‟ compensation,
professional liability, public liability and motor liability insurance.
Catastrophe
Reinsurance
A reinsurance contract (often in the form of excess of loss reinsurance) that, subject
to specified limits and retention, compensates the ceding insurer for losses in related
to an accumulation of claims resulting from a catastrophe event or series of events.
Claim The amount payable under a contract of insurance or reinsurance
arising from a loss relating to an insured event.
Claims
Incurred
The aggregate of all claims paid during an accounting period adjusted
by the change in the claims provision for that accounting period.
Claims
Provision
The estimate of the most likely cost of settling present and future
claims and associated claims adjustment expenses plus
a risk margin to cover possible fluctuation of the liability.
Combined
Operating
Ratio
The sum of the loss ratio and expense ratio. A combined operating ratio
below 100% indicates profitable underwriting results. A combined
operating ratio over 100% indicates unprofitable underwriting results.
Deferred
Acquisition
Costs
Acquisition costs relating to the unexpired period of risk of contracts
in force at the balance sheet date which are carried forward
from one accounting period to subsequent accounting periods.
Excess of Loss
Reinsurance
A form of reinsurance in which, in return for a premium, the reinsurer accepts
liability for claims settled by the original insurer in excess of an agreed
amount, generally subject to an upper limit.
Expense Ratio Underwriting and administrative expenses as a percentage of net earned premium.
General
Insurance Generally used to describe non-life insurance business including property and
casualty insurance.
Gross Claims
Incurred
The amount of claims incurred during an accounting period before deducting
reinsurance recoveries.
Gross Earned
Premium (GEP) The total premium on insurance earned by an insurer or reinsurer during a specified
period on premiums underwritten in the current and previous underwriting years.
Gross Written
Premium (GWP) The total premium on insurance underwritten by an insurer or reinsurer
during a specified period, before deduction of reinsurance premium.
Incurred but not
Reported (IBNR)
Claims arising out of events that have occurred before the end of an
accounting period but have not been reported to the insurer by that date.
Long-tail Classes of insurance business involving coverage for risks where notice of a
claim may not be received for many years and claims may be outstanding for
more than one year before they are finally quantifiable and settled by the insurer.
Loss Ratio Net claims incurred as a percentage of net earned premium.
Margin for
Uncertainty
The margin held over and above the actuarial best estimate in order to provide greater
certainty that claims reserves will be sufficient to settle all outstanding claims as they fall
due.
Net Claims
Incurred The amount of claims incurred during an accounting period after deducting reinsurance
recoveries.
Net Claims
Ratio Net claims incurred as a percentage of net earned premium.
25
Glossary
Net Earned
Premium (NEP) Net written premium adjusted by the change in net unearned premium for a year.
Net Investment
Income
Gross investment income net of foreign exchange gains and losses and
investment expenses.
Net Written
Premium (NWP) The total premium on insurance underwritten by an insurer during a specified
period after the deduction of premium applicable to reinsurance.
Outstanding
Claims Provision
The amount of provision established for claims and related claims expenses that
have occurred but have not been paid.
Personal Lines Insurance for individuals and families, such as private motor vehicle and
homeowners insurance.
Policyholders’
Funds Those financial assets held to fund the insurance provisions of the Group.
Premium Amount payable by the insured or reinsured in order to obtain insurance or
reinsurance protection.
Short-tail Classes of insurance business involving coverage for risks where claims
are usually known and settled within 12 months.
Recoveries The amount of claims recovered from reinsurance, third parties or salvage.
Reinsurance
An agreement to indemnify a primary insurer by a reinsurer in consideration of a premium
with respect to agreed risks insured by the primary insurer. The enterprise accepting the
risk is the reinsurer and is said to accept inward reinsurance. The enterprise ceding the
risks is the cedant or ceding company and is said to place outward reinsurance.
Reinsurer The insurer that assumes all or part of the insurance or reinsurance liability written by
another insurer.
Retention That amount of liability for which an insurance company will remain responsible after it
has completed its reinsurance arrangements.
Underwriting
The process of reviewing applications submitted for insurance or reinsurance coverage,
deciding whether to provide all or part of the coverage requested and determining the
applicable premium.
Underwriting
Expenses
The aggregate of policy acquisition costs, and administrative,
general and other expenses attributable to underwriting operations.
Underwriting
Result The amount of profit or loss from insurance activities exclusive of net investment income
and capital gains or losses.
Underwriting
Year The year in which the contract of insurance commenced or was underwritten.
Unearned
Premium
The portion of a premium representing the unexpired portion of the contract term as of a
certain date.
Written
Premium Premiums written, whether or not earned, during a given period.
26
Glossary
